Debut of GoTo is indeed a costly ride

The much-awaited debut of GoTo, the combination of ride-hailing app Gojek and
e-commerce firm PT Tokopedia, offers investors a stark choice. Base your bet on near-term metrics like valuation and growth, or take a longer view of Indonesia’s growing middle class and digital economy.
On the numbers alone, GoTo’s initial public offering looks expensive. Subtract the estimated $4 billion cash war chest from an expected debut market capitalisation of $28.2 billion, and the mobility, e-commerce and financial services firm is on track for an enterprise value of around 10 times sales, based on a $2.4 billion revenue forecast for 2022 by Bloomberg Intelligence analyst Nathan Naidu. By comparison, e-commerce peers like Alibaba Group Holding Ltd. and Sea Ltd average 2.6-times, while ride-hailing and delivery companies including Grab Holdings Ltd and Uber Technologies Inc sit at around 2.5-times.
It’s worth looking at the circumstances behind such an optimistic price. GoTo is a local hero, heralding a new era for the sprawling archipelago of 17,000 islands. Indonesia’s population of 273 million is mostly young, increasingly connected, and eagerly embracing the convenience economy on their smartphones. Upon its stock-market listing in Jakarta, GoTo will be the country’s fourth-largest publicly traded company behind two banks and a state-owned telco. But just about 4% of its shares are on offer, with staff, drivers, merchants and app users all being invited to join the share sale — a smart way to drive up demand while rewarding key stakeholders.
In the end, the IPO priced at 338 rupiah. That’s above the midpoint of GoTo’s 316 rupiah to 346 rupiah target range, but certainly not a home run. More importantly, the issue size has been pruned to 40.6 billion primary shares, falling short of the 48 billion it had originally planned to offer. That said, it’s impressive that GoTo President Patrick Cao and CEO Andre Soelistyo could even pull off an IPO. Singapore-based rivals Grab and Sea have suffered massive selloffs in recent months as investors reassess their growth potential amid widening losses. Russia’s invasion of Ukraine has further clouded the outlook for a global economy mired in supply shortages and high inflation, while a fraying relationship between China and the West shows globalisation in retreat.

—Bloomberg